Sunday, June 01, 2008
With the recent concerns about increased oil prices, I've had numerous conversations with students and others about the demand for gasoline. Many have asserted that people simply can't drive less even when the price at the pump increases. Of course, my response is that the demand for gasoline has a negative slope, just like every other demand curve. I also tend to add that the last time gasoline prices were as high in real economic terms as they are today, the decrease in quantity demand was an elastic reponse to higher prices over a relatively short period of time. These pictures, which are REPORTED IN THE NY TIMES, fit well with my expectations about the demand for gasoline.